RBA Says Higher Interest Rates 'Working', Keeps Watchful Eye on Inflation

The Reserve Bank of Australia (RBA) says higher interest rates are 'working' to cool the economy, but households may not see mortgage relief in the near term. The RBA's minutes from its August decision confirm that a rate cut was not discussed, and the central bank remains vigilant for signs that inflation forecasts could be pushed off course.

The RBA is closely monitoring several factors, including the ongoing Middle East conflict, which may push up the cost of everyday items like petrol and groceries. It's also watching a massive data centre boom in Australia, which could increase labour and construction costs in an already strained sector.

RBA deputy governor Andrew Hauser said last week that the global AI investment boom could contribute to short-term inflation pressure domestically. 'Overall the risk is that when you go through an investment boom you will get short-term pressure on inflation and that is relevant to us as we set interest rates,' he said.

The RBA's focus on inflation data comes ahead of key figures for July, which could determine whether another rate hike is necessary. The Consumer Price Index (CPI) rose 3.8% over the year to June, down from 4% in May, while trimmed mean inflation remained unchanged at 3.6%. Both measures are above the RBA's 2-3% target.